George Square’s expert independent financial advisers provide answers to some of the most frequently asked questions around the pros and cons of delaying your State Pension.
Can you delay taking your State Pension?
You do not have to take your State Pension when you hit State Pension age (currently rising from 66 to 67 in stages between April 2026 and March 2028 – your exact State Pension age depends on your date of birth).
If you decide to defer it, you’ll get paid a higher amount when you do decide to claim, but you’ll receive it for a shorter time. Whether it adds up for you will depend on your life expectancy and your income.
If you do not claim your State Pension at State Pension age, it automatically defers. You do not have to do anything.
What are the benefits of delaying your State Pension?
Delaying your State Pension can be worth considering if you do not need the income from it straight away, particularly if you are still working or have other savings or pension income to rely on. Benefits include:
- Higher weekly payments: Your eventual weekly State Pension will increase for life. If you reached State Pension age on or after 6 April 2016, it rises by 1% for every nine weeks you defer — just under 5.8% for a full year. If you reached State Pension age earlier, the increase is 1% for every five weeks, or just under 10.4% for a full year.
- It may help with tax planning: If you are still working or receiving other taxable income, waiting to claim could help you avoid adding more income to your tax bill now. Your circumstances may change later, so it is worth thinking about when the extra income would be most useful.
- You may have some flexibility: Your options depend on when you reached State Pension age. If you reached it on or after 6 April 2016, you may be able to receive higher regular payments, take up to 52 weeks of deferred pension as a one-off arrears payment, or use a combination of the two. If you reached State Pension age before 6 April 2016, you can usually choose either higher regular payments or a lump sum.
Are there any potential drawbacks?
There are also a few important trade-offs to weigh up before deciding whether deferring is right for you.
- You may receive less overall: You give up payments while you defer, and it can take a long time for the higher weekly amount to make up for them. For someone receiving the full new State Pension, it takes more than 15 years to recover one year of missed payments, so your health and likely retirement needs are important considerations.
- You could pay more tax later: State Pension income is taxable. Although deferring may reduce your taxable income now, the higher payments could increase your Income Tax bill once you claim.
How do you receive your deferred State Pension?
When you claim your deferred State Pension, your options depend on when you reached State Pension age.
- If you reached State Pension age on or after 6 April 2016: a one-off arrears payment of up to 52 weeks, increased regular payments, or a combination of the two
- If you reached State Pension age before 6 April 2016: usually either increased regular payments or a lump sum
State Pension and extra weekly State Pension are taxable income, although tax is not deducted directly from State Pension payments. Different tax rules may apply to a lump sum under the pre-April 2016 system.
Please note, you cannot build up deferred State Pension while you or your partner are getting certain benefits, or for any time you have spent in prison. Deferring may also affect entitlement to means-tested benefits.
How long can you defer your State Pension for?
There is no fixed maximum deferral period, but the longer you defer, the longer it may take for the increased payments to make up for the pension you did not receive. Whether this is suitable depends on your health, life expectancy, tax position and wider financial circumstances.
To receive higher regular payments, you need to defer for at least nine weeks if you reached State Pension age on or after 6 April 2016, or at least five weeks if you reached it before that date. If you have already started claiming, you can usually choose to pause your State Pension once, but you will not be able to pause it again after restarting.
So, is it worth doing?
Ultimately, whether you should delay your State Pension will depend on your personal and financial circumstances. If you are unsure whether deferral could benefit you, consider seeking advice from a regulated financial adviser authorised to advise in the relevant area.
For a free initial consultation with one of our expert pension advisers in Nottingham, please get in touch.